China economy

In a private meeting with the US Ambassador to China in 2007, provincial Communist Party secretary Li Keqiang described his country’s GDP figures as “man-made” and unreliable.

To get a good idea of what was happening to the economy in his province of Liaoning, Li said he preferred to focus on three alternative indicators: electricity consumption, volume of rail cargo and the amount of loans disbursed.

All other figures, and especially GDP statistics, were “for reference only”, Li told the Ambassador, with a broad smile on his face. Continue reading »

GDP growth. Third-quarter growth could be the slowest since the depths of the global financial crisis, when China reported 6.6 per cent growth in the first quarter of 2009.

As if to add substance to complaints from emerging market policymakers about being ignored, a matter mainly affecting middle-income countries became the subject of close global attention only when it emerged as a bone of contention between the US and Europe.

The snappily-titled “investor-state dispute settlement” (ISDS) process, where companies have the right to sue governments for disadvantaging their businesses, has been the subject of deep controversy for years. But since the most vocal discontents were nations like Argentina and Venezuela that complain about more or less everything, it took well-organised campaigning and official German opposition to an ISDS chapter in the US-EU Transatlantic Trade and Investment Partnership (TTIP) to make it a central concern. Continue reading »

A reported export surge in September is failing to dispel the gloom suffusing forecasts for China’s third quarter GDP growth, which several economists predict will slump to a five-year low.

One problem lies with the export numbers themselves, which raise suspicions that over-invoicing may once again be artificially inflating export statistics as Chinese smuggle hot money into the mainland from Hong Kong to take advantage of an appreciating renminbi. Continue reading »

By George Magnus

Serial disappointments in emerging country growth rates since 2011 has forced the International Monetary Fund (IMF) to cut its five-year-ahead forecasts for a group of 153 emerging and low-income developing countries on six occasions since late 2011 (see chart).

However, in its latest World Economic Outlook, the IMF again assumes that current disappointments will give way to restored equilibrium growth rates over the next five years. But what if there is no equilibrium and emerging market (EM) growth continues to disappoint? Continue reading »

By Michael Power, Investec Asset Management

“Are we nearly there yet?” Most of us have faced – and in our younger days probably asked – the same question. As with children on long car journeys, this question is also posed by investors who cannot wait for bear markets to be over.

Commodity investors – and recently this has expanded from the metals and coal complexes to include oils – are wondering aloud when their recent ordeal will all be over. The same can be said for investors in those commodity-rich countries, as they survey their currency-ravaged portfolios. And this phenomenon is not confined to emerging markets (EM) – investments in Australia, Canada and even Norway have suffered the same fate. Continue reading »

By Andy Rothman, Matthews Asia

China’s housing market is one of the most important parts of its economy, and also one of the most misunderstood. This sector is important because residential real estate together with construction last year accounted directly for about 10 per cent of GDP, 18 per cent of fixed-asset investment, 10 per cent of urban employment and more than 15 per cent of bank loans. It is also misunderstood because few observers appear to grasp the structure of China’s residential market. Continue reading »

By Eswar Prasad, Karim Foda, and Abhinav Rangarajan

China is making steady progress on its path to making the renminbi an international currency, as the FT writes in a Special Report, The Future of the Renminbi, published today.

See here for an Interactive graphic that traces the renminbi’s progress since 2000.

China continues to gradually open up its capital account, make offshore renminbi liquidity more easily available, and sign up more renminbi trading centers (London and Frankfurt most recently). To become a reserve currency, China also needs to let the renminbi’s value be market-determined rather than being tightly managed relative to the US dollar.

On March 16th of this year, China took another step towards freeing up its currency. The daily trading band around the renminbi’s central value relative to the U.S. dollar was widened from 1 percent to 2 per cent in either direction. The reasonable expectation had been that this would lead to faster appreciation of the currency and more volatility. Instead, the opposite happened. Was the shift to a wider trading band just a head fake? Continue reading »

Official statements on bad loans in Chinese banks come with a health warning: analysts widely believe they understate the real level of delinquency by a wide – though unknowable – margin.

Nevertheless, official statistics can be helpful in assessing whether the problem is deepening or alleviating. In that context, an analysis published on Thursday by EY, the accounting firm, shows stress levels rising rapidly among China’s top banks. Continue reading »

A closely-watched indicator of economic activity in China is showing an unexpectedly robust reading for September, according to an announcement on Tuesday. But is a real growth rebound underway, following several signs of a slowdown in the third quarter so far?

Hong Kong stock market investors appeared to reserve judgement, allowing the Hang Seng index to slip 0.49 per cent, or 118 points on Tuesday to 23,837. Economists and other survey-based indicators of Chinese economic activity reinforced the skepticism. Continue reading »

There is more gloomy news for the world’s second largest economy. A comprehensive official survey of Chinese households, businesses and banks finds demand for loans slackening further in the third quarter, suggesting scant prospects of a reprieve from the credit slump seen in August and July.

Some 3,100 banks interviewed by the People’s Bank of China (PBoC), the central bank, reported a significant easing in loan demand among all three categories of firms – small, medium and large – for the third quarter, which ends at the end of September.

The loan demand index fell to 66.6 per cent, down from 71.5 per cent (see chart). The muted demand for loans is set to create headwinds for the PBoC’s initiative this week to boost economic growth by injecting Rmb500bn ($81bn) into the five largest state-owned banks, economists said. Continue reading »

China’s plan to spread the wealth of coastal cities into poorer interior regions is starting to pick up speed, with better transport infrastructure in particular likely to accelerate the process, according to HSBC Global Research.

While China’s coastal regions have seen breakneck growth – the nominal GDP of seven coastal provinces has increased nearly 200 times since 1978 – its vast inland areas, remote and undeveloped, have lagged behind. Per capita income in the coastal regions of China is twice as high as in inland provinces. Continue reading »

A huge bonfire of the brands awaits auto manufacturers in China as some 90m car owners prepare to disregard loyalty when they chose their next model.

A survey of some 2,400 car owners conducted by the Boston Consulting Group (BCG) found an itch to switch brands among 83 per cent of respondents who drove domestic Chinese brand cars. Of these, only 30 per cent said they would drive another domestic brand as their next car, while a full 40 per cent said they planned to plump for a Volkswagen.

The findings suggest that the next big trend for auto manufacturers in the Chinese market – which has expanded tenfold since 2000 to register annual sales of around 20m units – may not be so much concerned with chasing growth as with inculcating brand loyalty. Continue reading »

China’s leading credit rating agency will soon begin to provide English language ratings for local Chinese debt in the latest sign of a growing desire on the part of international investors to access the country’s highly restricted domestic debt markets.

“Dagong is making preparations to release ratings for onshore debt in English early next year,” the company’s chairman, Guan Jianzhong, told beyondbrics. “There are more international investors looking at Chinese debt.” Continue reading »